Counting the full cost of the living wage
It can’t be often that news of a pay increase generates anything other than a wholly positive reaction.
Yet that was the case last week when employers responded in surprise and concern to the announcement that the living wage would rise by a hefty 2.3% to £8.45 an hour.
The living wage is different to the Government’s National Minimum Wage and National Living Wage in that it is voluntary – employers choose whether to sign up to it or not. It is calculated based on the cost of living, so more closely reflects the minimum people need to earn to get by. Since it was introduced, Leuchie House has been proud to call itself a Living Wage Employer and ensure all our lowest paid staff -17% of our workforce - receive the living wage.
So why the furore over a 20p an hour increase? It’s all about the differentials between rates of pay for different types of staff. Any employer worth their salt will recognise and reward the different skills and experience of their various categories of staff by having different pay bands. If you increase the rate of pay for one category of staff, this will clearly have an impact on the differentials between the rates you pay all other employees.
In Leuchie’s case, if we are to put the pay rate for our lowest paid staff up by 2.3%, we would need to implement this across the board. This would add £61,000 to our annual wage bill – a major consideration for a small charity.
There are lots of reasons why it’s important to us to be a Living Wage Employer. We aspire to be an organisation that people really want to work for. We believe wholeheartedly in valuing and rewarding all our staff. They are our biggest asset and the reason we are able to deliver a five star service.
We now need to weigh up what’s right for Leuchie House and for our employees. A pay increase is only one way of rewarding staff and we may have to consider more sustainable routes as we weigh up our options over the coming weeks.
Mairi O'Keefe, Chief Executive, Leuchie House. Published in the East Lothian Courier, 10 November 2016.
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